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Black Money – “Economics is not a moral subject”

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Back in 2008, when the whole world was in a financial ruckus, India was not as affected as rather seems to be the fact. Altogether the country was extraordinarily afloat throughout the whole incident and started recovering just in a year.

And all of that was the blessing of ‘black money’.

Yes, that is what the chief economist of the World Bank and former head adviser to the Indian government, Kaushik Basu claims in his new book, An Economist in the Real world.

What is the deal?

The deal is simply that when all the nations and their banks were busy tackling the overburden of subprime loans (one that is given to people who have a previous record of difficulty in maintaining the repayment schedule) crisis. Indian almost suffered from none.

  • It is evident from the instance of 2005 to 2008, when the economic growth of India was an astounding 9% per annum.
  • But the underlining trick was in the scenery of housing and property pricing boom which had gone up to the rate of 16% between 2002 and 2006; more than the average income of India and even more than that of USA.

All because unlike most parts of the world, in India one will not find the price of the house or that of the property listed in the real estate agent’s office. The amount of the land is fixed by the seller and the person can easily demand the first half in the form of formal payment while the rest in cash. And this latter mode of payment is what constitutes the ‘black money’.

A bit more of the deal –

First up is that the moderate the payment is on the official papers, the less the risk of receiving a hefty capital gains tax bill. While the second one is that, it also benefits the buyer as they have to pay much less of the property tax.

While the UK and the USA did start charging as much as 110% more mortgage at the peak of the property boom, in India the mortgage amount has always been much lower than the actual cost of the property.

That’s why when the prices of the houses and lands fell in India back in 2008 and 2009, the

banks were still comfortably within the range of the property values.

How to solve the problem, according to Mr. Basu?

Some time back, Mr. Basu famously advised the government to criminalize the bribe-takers instead of the givers.

It will be interesting to see if the law is implemented then how the equation will affect the whole dynamics.

Though, he laments that the Indian law has not taken his suggestion into the account. It is likely that if it is ever sanctioned then the bribe-givers, freed from the threat of prosecution will automatically want to resist and be reluctant to take part in the bribe cycle again.

Ultimately, it can be concluded that his whole explanation is sound enough as proved by the fact that India’s economic growth was 7.4% in the third quarter of 2015. Apparently the fastest growth of any major nation in the world.

Kaushik Basu was talking to BBC

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Vivo opens online store in India

The Vivo innovative range will be available in 10,000 postal service areas (pin codes) across the country, the company said.

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Vivo to open E-stores in India to increase its market. Wikimedia Commons
Vivo to open E-stores in India to increase its market. Wikimedia Commons
  • Vivo is opening online stores in India in order to expand its market.
  • With new E-stores, the smartphones will be available to customers all over India.
  • The company is also thinking of launching an E-store app to make it convenient for people.

In a bid to expand its online presence, Chinese smartphone maker Vivo on Monday launched its E-store in India that will deliver products and services across the country.

“With the new E-store, Vivo’s innovative range of smartphones will be available to our customers across the country with special launch offers,” Kenny Zeng, Chief Marketing Officer, Vivo India, said in a statement.

Vivo will sell its phones through E-stores in India now.
Vivo will sell its phones through E-stores in India now.

The Vivo innovative range will be available in 10,000 postal service areas (pin codes) across the country, the company said.

The handset maker also announced its “Launch Carnival” under which, it is offering benefits on smartphones from January 16-18.

Buyers will get discount coupons worth up to Rs 2,000 on select smartphones, 12-month zero-cost EMI and one-time screen replacement in Vivo V7 and V7+ smartphones, the company said.

The company is also planning to launch its E-store application with features such as Augmented Reality (AR) support with the live chat option to help customers make purchase decisions. IANS

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